JoeFriday

I didn't take anything out of context. I just want to know what it means when you claim a $3 rate was maintained or held, yet they had no reserves which means no rate could be supported. Thus your statement is self contradictory. Perhaps I misunderstood what you meant, which is why I asked. But, instead of simply explaining what you posted, you choose to throw some slurs around instead.

Partially. I enjoy debate, as long as all sides are courteous. If I can save someone some money, that's even better. Isn't that why you are here also, that you enjoy the discussion? i.e. if the dinar were to RV (an impossibility) there is no way you could miss it, it will make the news on every channel instantly. So there is no reason for dinar holders to be here either other than the community and discussion, is there? Under Saddam,but not when the new notes were issued. Then it was 1480 IQD / USD, then within a few months (as the figures became clearer I'm thinking) it was raised again to 1170. That points to having around $6B in reserves at that time. Where is the problem? Now they have $68B in reserves (i.e. a bit more than they need at the current rate, but you can always peg lower. e.g. the Saudi's have 3x the reserves they need at their pegged rate but do not wish to raise it). Note that as GDP grows you must grow M2 as well or the economy does not have sufficient funds to run. As long as you raise reserves proportionately, its not inflationary. What? When they remove the 3 zeros (if they do so) the new currency will be worth 1000 times the current currency so that's an 86 cent dinar, not a 4 dollar dinar. How did you get to $4?

Agreed.However if inside Iraq you could exchange dinar for (e.g.) $3 then they were actually maintaining that rate but not internationally However if dontlop is correct that the reserves were gone, then such a rate could not even have been internal as there would be no dollars to exchange. I'm guessing that in fact they were not "maintaining" such a high rate inside or outside Iraq. Perhaps that was the official government rate, but if no one could actually get it, then its meaningless.

Your comment that you question the sanity of those that post here after selling their dinar, seems pretty insulting to me. It isn't always pleasant. Seeing the reality that you have fallen for a fantasy that will never happen isn't a fun thing. I have never called you or anyone else here any of those things. But, there are NO ways a huge overnight RV can happen.

Right, but the CBI site does not say the reserves were gone. But its close to the same question, what does it mean that the "dinar was at 3.21" as the history page says, IF it was the case that the CBI did not provide that rate to exchangers, even in Iraq (if that was the case and if they had no reserves as dontlop claims, what would they have used to do such exchanges?). i do not understand the black market rate being lower than the offical rate either. This is the case today as well. Officially the rate is 1170 but the black market rate is said to be more like 1200 (so not that much off). Still if you can just go to the CBI and get 1170 (or back in 1987 get 3.21) why would anyone go to the street corner to get less than that? Unless the CBI didn't really offer that rate?

In other threads dontlop has said I don't understand what this means. As Doctor Robins points out the dinar was not internationally tradable, but even so if the "value was held at over 3 bucks for one dinar" then some entity somewhere has to be offering that rate. If the CBI reports "sorry we have no dollars" when a importer wants to convert, then they are not holding the value at 3 bucks. The cost (in dinars) of most things in Iraq would skyrocket, i.e. hyperinflation which is pretty much the opposite of holding value. Can you explain this to me dontlop?

Obviously at that time I did not know the facts and let emotion get the better of me letting myself think somehow it could work, just like the position you are in now, and you declined to engage in my thought experiment. So there no facts knowable about Iraq and all we can do is offer opinions? If that indeed is your viewpoint, there is likely little point in continuing, as we both have said, so no need to respond if you would rather not. Thinking isn't always pleasant. Everyone is here for the same reason, the discussion. Your insults to those that participate in such discussion but do not own dinars is pointless. What difference does that make? The facts are still the facts.

In another forum (where I can not post) Biker says How does an RD screw anyone out of anything (other than showing that an RV is a fantasy, but Iraq certainly never told anyone that if you buy their currency they will repay you 1000 fold).

Is everything an opinion with no truth possible? You say you know the risks, but your hope that the known facts of Iraq's economy and currency are simply false indicates you do not know since how could that be possible on a scale to make even a 1 penny RV possible?Suppose just as a thought experiment, that an RV is in fact impossible . Given that hypothetical would you say you know the risks? Merely using the phrase "risks" indicates to me you do not know since if there is no possibility of a profit then a lose is certain. That isn't a risk, its a certain loss.

Zambia's GDP is about $20B in 2011 so perhaps 1/5th or so of Iraq's. What is the relevance of that wrt an RD?

When in the history of civilization has a financial institution (bank, central bank, investment house, country) reported that their liabilities were GREATER than they really were and reported assets that were LESS than reality. If there is an error it is invariably the other way, that the Iraq situation is in fact worse than it appears. We know how much oil is being pumped and sold, we know this dominates the Iraqi economy and we know M2 is about the size we would expect for that size of an economy. The numbers could all be off by +/- 10 or 20% and it makes no difference. We know they are not off by 1000% because of the interactions with the rest of the world. You might as well be hoping for the Easter Bunny to leave a million dollar bill under your pillow. But, that is of course your choice to do so if you like.

I should have also mentioned oil sales as that is likely the biggest increase. The GOI takes its royalties (in dollars) deposits them at the CBI and takes out dinars to pay items in its budget increasing M2 (but fully backed by the dollars that got added to the reserves, so not inflationary). An example of both GDP and M2 going up together.

It ins't just inflation that increases M2 but the CBI just issuing new money (making loans, etc) where they match the amount with reserves so there is no inflation. Generally M2 is in the same order of magnitude as GDP for most countries. So Iraq's M2 is about what we would expect for an economy that is working. The figures each year match up with this, and the operation of the CBI has been scrutinized by the World Bank, IMF, UN, US Treasury etc. for the last 9 years. So I see no way their economy could be working if M2 was 10x smaller today or that the CBI could (or would want to) fool all the inspectors for so long. i.e. Iraq very much wants international acceptance and "pulling a fast one" is not how to attain such status. No, it can't happen. How would Iraq back their currency? Lets say it RV's to a dime (what Adam is pushing I believe). Ok, now M2 represents 7.2 T dollars. M1 around half of M2 if I recall. so maybe 30T dinars or at a dime each 3T dollars. M1 is readily spendable money (cash and checking accounts). Lets say after years of hardship on average Iraqi's decide to save 90% of this windfall (how they do that is another question) and spend 10% immediately to improve their lives. The cars, flat screens, generators, air conditioners, etc etc are all imported. When an importer buys something they must pay in the currency of the country of origin (BMW does not want dinars for their cars but Euros). The CBI has about $68B USD in reserves, but this 10% of life improvement is $300B. What do you think will happen when someone asks to exchange and the CBI says sorry we can't do it? A massive run on the bank, but it will be too late of course, and being the central bank there is no one to bail them out. It can't happen, they do not have the funds to back an exchange significantly higher than what it is right now.What about the 90% they might decide to save? Will they decide that keeping it in Dinars is the best approach? I'd guess not and there would be a massive attempt to exchange for other currencies for this as well, but again the CBI can not come close to supplying it and would go bankrupt in the first seconds after such an RV, which is why it can not happen. Even if some idiot in power were to declare such, the bank can not possibly make good on it. There is all sorts of silly talk about how the dinars investors hold won't go back to Iraq and will be held by the US Treasury in some strange oil futures deal etc. Forget all that. Speculators holding maybe 1T of the 72T M2 are not significant (not that the CBI has a mans to pay off that 1T at a dime per dinar either, but within Iraq you can't even apply silly US Treasure schemes). As for the dinar rising over 3-10 years, sure it might, but it also might go down. Though it would have to be floated to do either. If it continues to be pegged it will change very little. A growing GDP does not imply a growing currency. What business wants in this area is stability, not growth as that makes international deals very difficult. Even if it does grow over the years, its going to be normal growth (like a percent or two per year, not 100% or 1000% per year).

obviously. But I note you did not answer my question as to what differentiates fact vs opinion, unless your statement that "anything is possible" was meant to imply that there are no facts and all is just opinion. Do you really operate that way in your day to day life? I find that very hard to believe. I would say you have lost touch with reality. Clearly $1,000 USD per IQD is not possible, its not unlikely its impossible.I doubt there is much point in us attempting a discussion since we do not share a common basis of reality. Enjoy the dream.

Your welcome. And it is an open forum, these are not private conversations. What differentiates opinion from fact? Is it possible that Iraq will RV the dinar to $1,000 USD per IQD? However unlikely that is, is it possible?

Indeed we do not know what Iraq will do. We do know what they CAN NOT do. They might RD, they might not. They CAN NOT RV (to 1 penny or more overnight). That is simply a fact based on the fundamentals of currency.Alas I did not understand that before I got sucked into the dream of being rich tomorrow, but once I woke up and did my research I realized how silly I had been. The dream is a strong draw, its aided by all the pumpers, but its a lie.

On paper this will be the case for sure, so the budget would have to be adjusted way down. The petro dollars coming in remains the same and as you point out when the GOI exchanges them for dinars they will get far fewer dinars. But the price of everything in Iraq will have to come down. If bread selling now for 5,000 IQD were to remain at that level if the IQD goes up by 12x to one penny, there will be a massive influx of bread from Iraq's neighbors (legal or on the black market) to flood the market to profit from this 12x overpriced bread. So the price will drop quickly due to supply and demand. Certainly the GOI's budget would have to be rewritten to adjust everything down so it would be a chaotic situation for sure.The big problem is that the CBI doesn't have the reserves to cover a higher priced dinar as long as M2 is so huge.

Oh come on Dontlop, you know that when Dinarck says "there is no such think as an RV" he is using the term as it is used in dinarland, to be a revalue to at least a penny if not a dime or a dollar or three dollars. Of course countries that peg their currency adjust they rate the set, or revalue it from time to time (Iraq has done so at least a couple times since 2004). Its a huge (10x, 100x, 1000x...) instant change that can not happen.

The countries are certainly very different as are their economies. But they both share having a hyper-inflated currency (note past tense) but have inflation under control now. So to get back to a more normal exchange rate they RD (or rebase) the currency. Its not essential, but is often, but not always, done in such circumstances. So they might RD, or they might not. The "delete the three zeros" articles are certainly about an RD, but there is opposition to the process as well (with Iraq's political situation there is bound to be opposition to anything and everything from somewhere).

Not sure what you mean by "case closed". Dinars were exchanged 1-1 with Saddam dinars so his overprinting remained. Something like 4-5 Trillion dinars were exchanged, with another 3T or so in banks go produce an M2 of about 7T. Inflation continued, though at a much lower rate, and today M2 is 72T, but reserves are 68B so the exchange rate has remained steady as it was in 2004 with an M2 of 7T and maybe 6B in reserves. It isn't being done to get higher security measures but to lower M2 to get a exchange rate for the dinar of close to 1 USD. Paper money doesn't last long and they did not buy the printing technology but just contracted to have the bills printed. So contracting to have new ones printed only adds the setup costs for design etc. A few million for sure but not that much over their usual printing to account for wear. They may or may not RD. South Korea had a booming economy for 40 years and never RD'd their currency which is close to the same exchange rate as Iraq (it has been up and down by 50% or so over that time and is back to around where it was 40 years ago). But the issues is not RD or RV, but RD or not RD. There is no RV (or RI).

"the great lost wealth" to be restored by an RV. Yet another pumper myth. Inflation or worse yet hyperinflation as experienced by Iraq under Saddam is certainly hard on folks who hold cash, but overall wealth is not lost. You end up with vastly more currency with each unit being worth vastly less. e.g. (just using rough figures) 75T dinars at $0.001 each has the same overall value as 25B dinars each worth $3.00, its $75B either way.

What inflationary cost effects? An RD is neutral. If the economy is in trouble (high inflation etc) it won't correct that and if the economy is in decent shape it won't hurt.

i haven't figured it out either, perhaps it will go away Sat.

Hi Goldie, I didn't push this with Jax, but since you highlighted these two points I'll say a couple of things FIrst lets clarify that ignorance is not an insult (though it is often used that way) it is merely a state of a lack of knowledge. I am for example completely ignorant as to how to perform heart surgeon.Certainly all issues of concern over the dinar are very likely to have been expressed at one time or another here so indeed anyone who has been in this a while likely has seen and heard the arguments. But do they "know what I know"? I'd say clearly not. I know that a huge RV is impossible, not unlikely or even very unlikely but not possible. So what do I mean by that? From a scientific point of view I can not prove that the reality we experience even exists, this might all be a dream. So in that sense maybe hyper dimensional ET will have come and make Iraq the ruler of the universe and dinars will be worth a billion dollars each. But in the sense of how we evaluate ordinary events, like a change in currency value, incorporating ET and such is in the realm of impossibility. It is not true that "anything can happen" (right, we just ruled out ET as having an impact on the dinar). Based on just how currency works, how it gets value etc, an overnight RV by even the 12x needed to get to 1 penny is not possible. I know that, but you and Jax do not appear to know it. Note that those (perhaps you are among this group) who reply "oh yes it is possible, you can't know..." can not support that view. They can not explain how a giant RV might be accomplished or how the disasters that would ensue would be avoided, So they are not (from how I look at things anyway) expressing what they know, but are just asserting something. A mere assertion has little persuasive power. The primary group asserting this are those that are making money from your acceptance of that assertion. For some, it might not matter of course. If it is the case that even if you could be shown 100% convincing support that you are at best going to lose a little money, you would rather not know this and have the fun of constantly thinking "I'm going to be rich", then ok. Please put me on ignore as you just don't want to hear what I have to say and I'm not out to annoy anyone.

So you are equating the annoyance of your 5 year old behavior in how you are speaking, with people's upset over coming to the realization that they are not going to be an overnight millionaire. The first is just annoyance for its own sake, the second is a serious financial matter. Do you not see the difference? Also I see no evidence that I was put here due to other members finding my posts annoying. Has anyone complained about me? Given my newness to the site that seems unlikely. I suspect its more due to our host not wanting my views to be wide spread, which is of course his privilege since he pays for it. You also did not answer my question, are you NOT expecting or waiting for the big RV? If not, what return are you expecting?